Here’s a look at the Diablo Canyon Power Plant and its cooling water outfall taken from a boat off Diablo Cove. Photo by Neil Farrell
Local governmental agencies have signed on to a letter drafted by County Supervisors supporting the continued operations of the State’s sole remaining nuclear power plant, and asking that the plant owners start fully paying taxes again, too.
In December, County Supervisors approved sending a letter to the State Legislature urging support for continued operations at the Diablo Canyon Power Plant for another 20 years.
“As the host county for California’s only operating commercial nuclear power plant,” reads the letter from Supervisors, “which provides approximately 9% of the State’s total generation of power, San Luis Obispo County recognizes Diablo Canyon as a critical component of the State’s clean energy infrastructure. Extending the plant’s operational life for up to 20 years would provide stable, carbon free base load power that strengthens grid reliability, reduces greenhouse gas emissions, and advances California’s clean energy and climate goals.”
The letter calls for a few other things to also be done, including “support coastal land conservation and public access near the facility.” But the main thing is they want Pacific Gas & Electric to return to paying tens of millions a year in “Unitary taxes.”
“Continuation of operations, however, must be accompanied by fiscal fairness for the communities that host and support the facility. We therefore urge the Legislature to restore pre-decommissioning unitary taxation for DCPP during any extended period of operation.
“Historically, unitary tax revenues have been distributed to the County, cities, school districts, and special districts, supporting essential public services, educational programs, infrastructure maintenance and public safety. Restoration of this tax structure is critical to maintaining the fiscal stability of local governments public agencies.”
PG&E had agreed in 2016 to close Diablo Canyon when its two operating permits for its two nuclear reactors expired in 2024 and 2025, after negotiating with environmental groups who had been opposed to the company’s attempts to obtain new operating licenses from the federal Nuclear Regulatory Commission, the agency that regulates and oversees all atomic energy use in the U.S., including power plants.
PG&E had been well into the NRC’s lengthy re-licensing process and was being fought every step of the way by anti-nuclear power groups, when the deal was struck to close Diablo Canyon down.
Part of that deal was a law passed by the Legislature that allowed PG&E to depreciate the value of the plant for tax purposes.
When the County and school district cried foul, another deal was struck wherein PG&E paid tens of millions to the County to disperse to the other agencies to make up for the lost tax revenues.
But in 2022, with the State experiencing brown outs in the summer months when electricity demand is highest, the State Legislature asked PG&E to remain open an additional five years (to 2030). That’s how long it was estimated it would take to reliably replace the 2,200 megawatts of energy the plant produces with renewable, carbon emissions-free sources like wind and solar.
PG&E agreed, and sought a five-year license extension from the NRC, but was told the agency would only grant a 20-year extension.
Meanwhile, the depreciation went forward and PG&E’s Unitary Taxes dropped considerably, depriving the local agencies — especially SLO County and the San Luis Coastal Unified School District — of millions in annual revenues.
According to the County, “Prior to the 2016/17 decommissioning efforts, the County, local cities, schools and special districts received approximately $21 million annually in unitary taxes attributable to Diablo Canyon Power Plant (DCPP). Unitary tax receipts have since been reduced to $8M as the assessed value of the plant has declined pending its planned closure.
“The renewed extension of operations of the DCPP will require significant new investment, which under unmodified unitary tax regulations, would increase the taxable plant value and return essential unitary taxes to the region.”
With PG&E now well into the re-licensing process for that 20-year permit, the agencies are seeking to restart the money flow now that the one-time payments have dried up and they face tight budgets.
“Legislation enacted to extend the operations,” the County report said, “includes provisions to exempt the new investment in DCPP from taxable value, preventing the restoration of unitary tax revenues to the region.”
The County asked the Legislature to find some other revenue replacement, if the Unitary Taxes can’t be restored.
“If restoring the pre-decommissioning unitary tax treatment proves infeasible,” the County’s letter reads, “we request alternate financial mitigations to the County and local jurisdictions impacted by exemptions of taxable value on the DCPP during the period of extended operations established by the statutory prohibition against including operating costs in PG&E’s rate base.”
The County is also looking to conserve the 12,000 acres of land surrounding the plant, which stretches from Montana de Oro State Park around Point Buchon to Avila Beach. Included in that land are coastal bluffs, rocky shorelines, coastal plains, oak woodlands and numerous archaeological, Native American sites. It’s a beautiful; mostly untouched slice of Coastal California and most everyone supports preserving it and opening it up to passive uses.
“In tandem with extended operations,” the letter reads, “we support further conservation and public access frameworks for lands surrounding Diablo Canyon.
“Protecting these coastal and natural resources ensures long term environmental stewardship, while providing opportunities for responsible public access and public benefit. This balanced approach of clean energy, fiscal stability, and environmental conservation serves both local communities and the broader interests of the State.”
But doing this could affect the assessed value of the overall property and lessen the tax burden. The County thought of this too.
“In addition, future DCPP allocations related to changes in the values being assessed for portions of the property that may legislatively transition from highest and best use assessed acres of land towards lower value assessed acres of land due to new conservation restrictions should not financially penalize the affected region with lower assessed revenue figures.”
The letter “respectfully requests” the Legislature to:
• Support the Nuclear Regulatory Commission’s regulatory approval process and establish a state licensing pathway to authorize DCPP to operate for up to 20 additional years.
• Enact legislation restoring historic pre-decommissioning unitary tax treatment for Diablo Canyon Power Plant including land valuation for the duration of its extended operations or provide alternate equivalent financial mitigations.
• Support the California Coastal Commission’s land conservation and public access plan for lands surrounding Diablo Canyon, in coordination with appropriate regulatory and conservation agencies.
Supervisors asked other agencies to sign on to the letter and some have already done so, as they too have skin in this game.
The Cayucos Sanitary District voted in January to support the letter. “In the event of Diablo Canyon’s closure, or continued operation of Diablo Canyon with downzoning of surrounding properties due to conservation efforts, the District would likely see tax revenue reductions of approximately $25,000 per year,” reads a staff report from the CSD’s Jan. 15 meeting.
In Morro Bay the tax hit is a bit more.
In a Jan. 20 report, new City Manager John Craig reported that the City had gotten $154,000 in Unitary Taxes from Diablo Canyon for the 2021-22 fiscal year; $142,000 in 2022-23; $125,000 in 2023-24; $115,000 in 2024-25; and, $103,000 in 2025-26.
The SLO City Council also was asked to sign on to the County’s letter, but the Council chose to form an ad hoc committee and send its own letter.
Supporting or opposing a single issue or project didn’t jibe with the City’s normal legislative policies. The ad hoc committee consisted of Council Members Jan Marx and Michelle Shoresman.
“Council opted not to sign the letter,” reads the SLO City Council’s staff report, “and instead appointed an ad hoc committee to provide direction to staff on preparing a draft letter aligned with guiding principles and the City’s Legislative Platform, and to return to Council for approval at the Feb. 3, 2026 City Council meeting.”
“The City’s focus has been on ensuring that any continued operation prioritizes public safety, provides appropriate fiscal mitigation for local impacts, and incorporates long-term land conservation planning,” the report said.
The draft letter that came out of the ad hoc committee’s work, “urges State legislation to:
• Support coastal land conservation and public access planning.
• Restore lost tax revenues for local governments and school districts impacted by continued DCPP operations.
• Ensure public safety, fiscal equity, and long-term planning during the current extension through 2030 and any future operations.”
The plant is currently operating under Senate Bill 846, which granted continued operations for 5 more years.
Last June, the NRC declared, after completing safety and environmental reviews of the plant, that it was safe to continue operating for another 20 years, though the overall re-licensing process is still ongoing.
And as the County’s letter mentions, the Coastal Commission also looked at Diablo Canyon and issued a permit to continue operations that included conservation requirements for the overall property.
Among the pending issues to be resolved is the continued use of seawater for cooling steam at the plant, so-called once-through cooling. The Regional Water Quality Control Board is reportedly looking at that issue.
The cooling system had been a major hurdle for PG&E’s efforts at re-licensing, as once-through cooling was supposed to be phased out and ended a decade ago, by orders of the California State Water Resources Control Board.
Switching cooling systems at Diablo Canyon has been estimated to cost over $1 billion.
It was the use of once-through cooling system that doomed Duke Energy’s efforts to replace the Morro Bay Power Plant in the early 2000s.
Duke spent an estimated $35 million trying to get permits for its replacement project, which was dropped after the SWRCB’s once-through cooling order was approved.
